FREE MARKETS DESTROY

What Exactly is a Free Market?

What do we mean by “free markets” or even “capitalism” for that matter? It’s probably not what you think. For many people, these terms conjure images of Wall Street bankers and multinational corporations. Perhaps they also bring to mind small businesses and scrappy startups. All of those are part of free market capitalism, but they’re only one piece of the puzzle.

To understand the whole picture, you need to start with a single individual.

Start with yourself. You have hopes and dreams, talents and passions. You want to build a life that brings you and the ones you love happiness and excitement even as you achieve independence and stability. Ultimately, you want to build a life with meaning, filled with purpose. Everyone of us wants that for ourselves. And for each one of us, that life looks as unique and diverse as we all are. For all the things we share as a community and a society, there is no getting around the fact that each of us values different things at different times in different ways. One person’s trash is another person’s treasure. No one can know you as well as you know yourself. The same is true for every one of us.

So here you are, a unique individual, out in the world trying to figure out life. Doing it the “free market” way means following three pretty simple rules.

The first and most important rule: don’t hurt other people or steal their stuff. Human history is filled with plundering tyrants hurting other people and stealing their stuff. That’s not what free markets are about. In a free market, every transaction should be voluntary and based on mutual consent. There’s nothing “free market” about slavery or subjugation, which is why some of the original promoters of free markets, people like Adam Smith and John Stuart Mill, were also passionate abolitionists. Free markets aren’t about money, they’re about replacing violence with voluntary exchange.
The second rule is simple: keep your word. Free markets are about people reaching agreements with each other to work, trade or invest with mutual consent. It’s a system based on trust, from a handshake agreement to a formal contract. At the heart of free markets is human relationships and respect for each other. Private property is built on the promises you make in peacefully creating it or acquiring it from someone else. Corporations, nonprofits and other organizations in a free market are nothing more than the collection of agreements between all of the people involved in the enterprise. They can’t exist without the consent of the people that create them and contribute to them.
The final rule, assuming you’ve followed the first two: no permission required. Put another way, you’re free to try, you’re free to buy, and you’re free to leave. This is the essential “freedom” in free markets. If you’ve got an idea for a new company, a new medicine, a new school or new way to deliver the mail, nobody has the right to stop you. You don’t need to seek permission from the king, the president or post office. This is also the key to holding other people accountable. If your work isn’t up to snuff, your workplace is oppressive, your prices are too high or your product isn’t good, your competitors and your customers aren’t going to let you get away with it for very long.

Those are the rules of the free market: so long as you don’t hurt other people or steal their stuff, and so long as you keep your word, you’re free to do whatever you want. You’re free to work for whoever you want. You’re free to love and marry whoever you want. You’re free to worship whoever or whatever you want. You’re free to trade with whoever you want.

And with this freedom, you’re empowered to take on any problem you want to. Free markets destroy the problems in our society because they empower free people to destroy those problems and offer new solutions. Free markets empower everyone, but especially underdogs, upstarts and immigrants to take on the status quo precisely because they don’t need to seek permission first. Free markets don’t respect traditions unless those traditions are maintained peacefully. Free markets are the most radical, revolutionary force for change humanity has ever discovered. And the reason is simple. Free markets are nothing more and nothing less than each of us and all of us having the right to try our best at improving everything for each other.

"What Exactly is a Free Market?!"
MMost people agree that markets are great at making stuff. Hiking boots, bicycle helmets, electric cars and iPads—nearly all the products that make our lives safer, easier, and more fun are the result of market forces. And while it’s wonderful to have access to such amazing tools, even an innovation as revolutionary as the washing machine is still, on some level, just more stuff. If you’re at all skeptical about free markets, then it’s fair to ask if they can do more than fill up our stores and homes with toys. Can markets actually solve humanity's toughest problems?

It’s hard to imagine a tougher and more persistent human problem than hunger. For thousands of years, hunger was the norm for most of the people on the planet, and even the richest kings and sultans were vulnerable to famine.

But starting in the 1700s, everything changed thanks in part to one of the greatest innovations in human history—specialization. Specialization is the division of work into narrow, “specialized” niches. It’s the reason why you can put food on your table by cutting hair, or writing code for video games. And that’s the product of free markets.

WWithout specialization, everyone needs to grow their own food, sew their own clothes, and build their own homes. Once we begin to specialize, workers and entrepreneurs can focus on specific tasks, like growing wheat. Their expertise allows them to produce a surplus, which they trade with clothes makers and home builders. Pretty quickly, everyone becomes better off. And because the farmer needs the builder and vice versa, they are more likely to treat each other with tolerance and respect.

And as farmers specialized—one growing corn, another growing apples—they started to experiment with new tools and techniques: crop rotation, selective breeding, fertilization, and many more. Gradually, one innovation at a time, farmers managed to make their labor more efficient and more profitable.

From the time of the American Revolution to today, the per capita supply of calories in the West has gone up more than 70 percent. The picture is even more impressive when you zoom in on the poorest sections of society. Two-hundred years ago, the poorest 20% of individuals in England and France lacked the energy for sustained work. In other words, the poorest people—those who desperately needed opportunities —couldn’t work because they didn’t have enough to eat. That’s the very definition of a vicious circle.

Share of the World Population living in Absolute Poverty, 1820-2015
– by Max Roser

Share of the World Population living in Absolute Poverty, 1820-2015
– by Max Roser

Source: Bourguignon and Morrisson (2002) and World Bank (PovcalNet) (2015)

All incomes are adjusted for inflation over time and for price differences between countries (1985-PPP before 1970; 2011-PPP after 1970).

Of course, hunger is still a challenge for millions of people around the world, but the progress we have made in just a few hundred years is nothing short of astonishing. From 1800 to 2010 the price of wheat, humanity’s most ubiquitous staple food, fell more than 88%. During the same period, the share of the world’s population living in so-called “absolute poverty,” surviving in the shadow of starvation, has fallen from 94% to just 9.6%.

Free Markets Destroy
Free Markets Destroy

A project of
WASHINGTON POLICY CENTER

Stay up to date
Nothing here should be construed as an attempt to aid or hinder the passage of any legislation before any legislative bodyFree Markets Destroy is a project of Washington Policy Center | Privacy Policy